Payment gateway

Introduction

So you're taking the next step and starting your own ecommerce website. Good for you! But you have so many decisions to make. Do you write your own shopping cart or use an existing one? Who should be your merchant account provider? Who will you choose to deliver your goods? With there being so many decisions to make you barely have enough time to sort through all of the information available to make the choice that is best for your business.

One important decision to make is which gateway will you choose to handle your credit card payments?

Definition: What is a Gateway?

A gateway facilitates online payments by connecting a secure order form with a specific merchant account at a processing bank. The gateway takes the submitted form data and presents it to the processing bank and awaits a response. It then returns this information to the site of origin to handle the response as it deems appropriate.

In short, a gateway connects your website to your merchant account.

By definition, gateways do not provide other ecommerce features such as shopping carts, web hosting, or merchant accounts. However, payment gateways offer additional services to compliment their gateways.

Features

Most online merchants don't realize that their gateway may offer many more features beside the expected ability to accept credit cards through an online form. The truth is that almost every gateway provider offers at least some sort of value-added features that can either make your life easier or assist you in increasing your revenue streams. Below is a short list of some of the more common features:

Virtual Terminal
Let's say you receive a phone call from a merchant who has a few questions about a product you sell on your website. Let's assume you answer their questions adequately and they decide they want to purchase that item. Do you tell them to go back to your website and place their order? Sure you can but why run the risk of them never completing their purchase when you take their order right there over the phone? But then how would you process their credit card? You can use a virtual terminal! A virtual terminal is quite simply a special web form accessible to the merchant that allows them to key in credit card sales. You can also use your virtual terminal to issue returns and void previous transactions as well.

Fraud Prevention
Fraud Prevention tools are probably the most important, and underutilized, feature offered by the major gateways. Most merchants who have had their store online for more then six months has been introduced to chargebacks and the negative effects that come with them. One of the biggest reasons for chargebacks in online transactions is fraud. Verifying that an order is legitimate during an online transaction is often difficult and time consuming. Utilizing the tools offered by your gateway provider means less time dealing with money-losing chargebacks and more time selling to your customers or promoting your business.

Recurring Billing
Merchants who charge their customers for services on a consistent recurring basis (month-to-month, quarterly, annually) will certainly find the recurring billing feature offered by many gateways a time saver. Simply provide the gateway with the pertinent billing information and tell it how often to charge the customer's credit card and it will automatically bill the customer for you. No more keying the information into software or a credit card terminal every month anymore. Just enter it and forget it. Great for subscription and membership type businesses.

eCheck Processing
Although accepting credit cards is by far the most popular way to pay online, other forms of payment should not be ignored. After all, your goal is to make it as easy as possible for your customers to part with their money. Electronic checks (eChecks) are a growing form of payment in which a customer enters their banking information (routing and account number) instead of physically sending a check by mail.

Reliability

In the ever-increasing speed of the Internet world it seems one second lost is an eternity. Every online merchant knows that if they are unable to process a transaction when their customer is ready to make their purchase that sale is assuredly lost. Why would the customer hang around and try to figure out what the problem is when they can go to a competitor's site and finish their purchase now? There's enough potential for problems in so many areas (programming, hosting, inventory) that the last thing you need is a third party service to fail you when you need them most. You need your gateway to be up and running 24 hours a day, seven days a week.